Market Overview

Asian chipmakers rush to boost production to meet global shortage

Asian chipmakers are rushing to expand their production capacity to meet a global shortage that has been acutely felt by carmakers, but the firms warn that the supply gap may take many months to plug as they struggle to keep up with strong demand. Automakers from General Motors to Stellantis and Honda Motor are shutting assembly lines due to the shortages, which in some cases have been exacerbated by the former U.S. administration’s sanctions against Chinese chip factories. Some firms have also furloughed staff.

Eight-inch chip manufacturing plants owned mostly by Asian firms, which tend to make older, less sophisticated chips, are particularly under strain primarily due to under-investment in recent years. The majority of such factories are used to make auto chips.

Consumer demand in China, especially for cars, has snapped back unexpectedly quickly from the coronavirus crisis, and orders for products such as laptops and mobile phones in regions still struggling with pandemic restrictions, such as Europe and the United States, have also picked up.

The global concerns about the chip shortage were underscored at recent quarterly earnings calls held by companies from Taiwan Semiconductor Manufacturing Co Ltd (TSMC) to South Korea’s SK Hynix.

United Microelectronics Corp (UMC), another Taiwanese chipmaker, plans to spend $1.5 billion on new equipment this year, up 50 percent from $1 billion last year, it said.

South Korea’s SK Hynix, the world’s No.2 memory chip maker, said it was speeding up plans to relocate its 8-inch facilities to China, which is expected to reduce costs, in light of the 8-inch boom. The company wants the relocation to happen “as soon as possible” rather than over an initially planned two-year period.

The combination of supply shortages and surging demand has put pressure on prices. UMC expects overall chip prices to rise 4-6% this year due to supply constraints set to last for another few quarters, while Renasas told Reuters that they have been negotiating for a 15% increase on auto chips and between 10% to 20% for other chips.

Asian chipmakers rush to boost production to meet global shortage, Reuters, Feb 8

Article Rating